Dec 12 Luxury lifestyle company Michael
Kors Holdings' shares are expected to fly off the shelves as
affluent shoppers continue to spend despite a gloomy economic
The Hong Kong-based company, named after fashion designer
Michael Kors -- a judge on TV show "Project Runway" -- is going
public at a time when U.S. investors are being highly selective
about their IPO investments.
"That he is a well-known designer is a very positive thing
and there is the thinking that the luxury end of the market,
which he represents to a certain extent, is making a comeback as
markets stabilize," said David Menlow, president of
The luxury goods industry has rebounded strongly after the
sharp downturn of 2009, and analysts see 2011 to be
another record year, particularly for watchmakers, luxury
hotels, fashion and leather goods groups.
The IPO window that was opened by Groupon's solid debut last
month is fast closing as the Holiday season kicks in, and
companies like Michael Kors and social games maker Zynga are in
a hurry to complete their listings by mid-December, in what is
seen as the busiest week for U.S. IPOs since 2007.
Michael Kors Holdings' offering follows a
successful $2.1 billion IPO of Italian fashion house Prada SpA
in Hong Kong and a $487 million IPO of Italian luxury
shoemaker Salvatore Ferragamo.
Prada's stock has fallen 14 percent since listing,
while Salvatore Ferragamo has seen its shares rise about 27
percent since going public.
Michael Kors Holdings' offering consists of 41.7 million
shares, at an indicative price range of $17-$19, valuing the
company at as much as $3.63 billion. It expects to start trading
Thursday on the New York Stock Exchange.
"The stock is going to open at a premium," said Menlow. "But
it will not leave investors behind with sudden spikes that will
have them saying, 'I wish I had bought the IPO.'"
At the high end of its anticipated price tag, the company
would trade at about 4.5 times its fiscal 2011 revenue of $803.3
million. Rivals like Coach and Ralph Lauren are
trading at 4.8 times and 2.4 times, respectively.
As of Oct. 1, Michael Kors Holdings -- which sells fashion
accessories, footwear and apparel -- operated 169 retail stores
in North America and 34 international stores in Europe and
Japan, and competes with retailers such as Coach, Burberry
, Ralph Lauren and Hermes International.
"In the long term, we believe that we can increase our
global retail store base to about 400 locations in North
America, 100 locations in Europe and another 100 in Japan,"
Michael Kors Holdings said in a recent regulatory filing.
The company has not only stayed profitable through the
financial crisis, but has also managed to nearly double its
profit to $72.5 million for fiscal 2011.
However, analysts did express some concerns about the
company's business, especially because it caters to the
"They've increased sales a lot over the past couple of
years. I don't know if they can continue the same rate of growth
with an economy this flatlined," IPOdesktop.com analyst Francis
Founder and Chief Creative Officer Michael Kors, who has
designed clothes for A-list names from Michelle Obama to Heidi
Klum, is selling 5.8 million shares and is likely to pocket over
$110 million, if the IPO is priced at the high end of the
Other stockholders selling through the offering include the
company's CEO John Idol, investors Silas Chou and Lawrence
Stroll who bought a controlling stake in Michael Kors LLC
through their Hong Kong-based private equity firm Sportswear
Holdings Ltd in 2003, and Michael Kors' partner Lance LePere.
The company itself is not offering any shares in the IPO.
Some analysts also said a company's brand tied to a single
person could cause some apprehension among investors.
The terms of Michael Kors' agreement with the company
provide for the continuous employment of Kors through the date
of his death or permanent disability.
"If a bus hits him tomorrow, it would hurt the brand, and it
would hurt the sales," Gaskins said.